16
DRAFT
Safeguard Diagnostic Review
for
Piloting the Use of Bhutanese Systems to Address
Environmental and Social Safeguard Issues in the
Proposed World Bank-Assisted
Rural Access II Project
Equivalence and Acceptability Report
November 2006
TABLE OF CONTENTS
ABBREVIATIONS AND ACRONYMS iii
EXECUTIVE SUMMARY v
Background v
Project Description vi
Structure of the Report vi
Results of Equivalence Assessment vii
Results of Acceptability Assessment ix
INTRODUCTION 1
Project Description 1
Donor Activities And Coordination 1
Background 2
Rationale For Project Selection 2
Structure Of The Report 3
Methodology And Process Followed In Determining Equivalence And Acceptability 3
PART I. EQUIVALENCE ANALYSIS 4
Applicable World Bank Safeguards And Ea Category 4
Legal Structure For Applicable Safeguards 4
Equivalence To Operational Principles Of Op 4.00, Table A1: Discussion 12
Relevance Of Differences To Rap Ii Project 16
Conclusions Of Equivalence Analysis 16
Measures To Attain Equivalence 17
R Measures to Sustain Equivalence in the Rural Roads Sector 18
PART. II ACCEPTABILITY ASSESSMENT 20
Environmental Governance Process In Bhutan 20
Institutional Authority and Capacity of Agencies with Environmental Mandates in the Roads Sector 27
Performance and Outcomes 43
Conclusions of Acceptability Assessment 48
Measures to Attain Acceptability For RAP II 49
Measures to Sustain Acceptability in the Rural Roads Sector 50
PART III. ROLES AND RESPONSIBILITIES OF RGOB AGENCIES AND OTHER STAKEHOLDERS 54
Responsibilities of RGOB Agencies and Other Stakeholders 54
Responsibilities of the World Bank 55
PART IV. PUBLIC CONSULTATION AND DISCLOSURE 56
Report on October 24, 2006 Public Consultation and Disclosure Workshop 56
Annexes
Annex A. Equivalence Analysis Matrix 60
Annex B. References 73
Annex C. List of Persons Met During Equivalence and Acceptability Missions 73
ABBREVIATIONS AND ACRONYMS
AEC / Application for Environmental Clearance
BoQ / Bill of Quantity
CA / Competent Authority
CAB / Contractors Association of Bhutan
CAS / Country Assistance Strategy
CSEMP / Contractor’s Site Environmental Management Plan
DC / Development Clearance
DANIDA / Danish International Development Assistance
DANTAK / Border Road Engineering Program (Government of India)
DCA / Department of Cultural Affairs
DEC / Dzongkhag (District) Environmental Committee
DoF / Department of Forests
DoLG / Department of Local Governance
DoR / Department of Roads
DYT / Dzongkhag Yarge Tshogdu (District Development Committee)
EA / Environmental Assessment
EAA / Environmental Assessment Act
EC / Environmental Clearance
ECoP / Environmental Code of Practice
ECPHR / Environmental Code of Practice for Highways and Roads
EMP / Environmental Management Plan
EFRC / Environmentally Friendly Road Construction
EFRC-SP / Environmentally Friendly Road Construction-Support Program
EO / Environmental Officers
EToR / Environmental Terms of Reference
EU / Environment Unit
EUSPS / Environment and Urban Sector Programme Support (DANIDA)
FMU / Forest Management Unit
GEF / Global Environmental Facility
GYT / Geog Yarge Tshogchung (Block Development Committee)
IBRD / International Bank for Reconstruction and Development
ICR / Implementation Completion Report
IDD / Investigation and Development Division (DoR)
IR / Involuntary Resettlement
MoA / Ministry of Agriculture
MoHCA / Ministry of Home and Cultural Affairs
MoWHS / Ministry of Works and Human Settlements
MRG / Monitoring and Reporting Guideline
NA / National Assembly
NCD / Nature Conservation Division
NEC / National Environment Commission
NECS / National Environment Commission Secretariat
NEPA / National Environmental Policy Act
NES / National Environment Strategy
NH / Natural Habitats
OP / Operational Policy
PAP / Project Affected People
PCP / Public Consultation Plan
PPAH / Pollution Prevention and Abatement Handbook
PCR / Physical Cultural Resources
PPD / Policy Planning Division (DoR)
PRSP / Poverty Reduction Strategy Paper
RAP I / Rural Access Project
RAP II / Second Rural Access Project
RECP / Regulation for the Environmental Clearance of Projects
RGoB / Royal Government of Bhutan
SDR / Safeguard Diagnostic Review
SNV / Netherlands Development Organization
TC / Tender Contract
UCS / Use of Country Systems
UNDP / United Nations Development Programme
UNEP / United Nations Environment Programme
WWF / World Wildlife Fund
CURRENCY EQUIVALENTS
(Exchange Rate Effective November 1, 2006)
Currency Unit = Bhutanese Ngultrum
N45.08 = $1
Vice President:Country Director:
Sector Director:
Acting Sector Manager:
Team Leader: / Praful C. Patel
Alastair McKecknie
Constance Bernard
Kseniya Lvovsky
Malcolm Jansen
EXECUTIVE SUMMARY
Background
1. Beginning in March 2005, the World Bank has been supporting a limited number of pilot projects in which lending operations are being prepared using the borrowing country’s systems[1] for environmental assessment (EA) and other environmental and social safeguards, rather than the World Bank’s operational policies and procedures on safeguards. The rationale for using country systems is to scale up development impact, increase country ownership, build institutional capacity, facilitate harmonization and increase cost effectiveness. These pilot operations are governed by a new operational policy (OP/BP 4.00) on “Piloting the Use of Borrower Systems to Address Environmental and Social Safeguard Issues in Bank-Supported Projects.”[2] OP/BP 4.00 elaborates on the approach, enumerates the criteria for assessing country systems, and specifies documentation and disclosure requirements and respective roles of the Borrower and the World Bank.
2. The World Bank considers a Borrower’s environmental and social safeguard system to be equivalent to the World Bank’s if the Borrower’s system, as determined by the World Bank, is designed to achieve the objectives and adhere to the applicable operational principles set out in Table A1 of OP 4.00. Since equivalence is determined on a policy-by-policy basis in accordance with Table A1, the World Bank may conclude that the Borrower’s system is equivalent to the World Bank’s in specific environmental or social safeguard areas in particular pilot projects, and not in other areas. [3] Before deciding on the use of country systems (UCS), the World Bank also assesses the acceptability of the Borrower’s implementation practices, track record, and institutional capacity. The above approach and criteria for assessment were developed with inputs from external stakeholders such as representatives of governments, bilateral and multilateral development institutions, civil society organizations, and the private sector and is consistent with commitments made by the development community in the Paris Declaration on Aid Effectiveness of March 2005.[4]
3. The Royal Kingdom of Bhutan (RKoB) is a small country with a limited number of donors and a small public administration where a harmonized approach to environmental and social safeguards can lower transaction costs and enhance local systems and capacity for safeguards implementation. Achieving a harmonized approach requires an assessment of the country’s safeguard systems (policies, laws and regulations) as well as the broad institutional arrangements for environmental and social safeguards management. Such an exercise would in the long term help Bhutan improve its overall environmental and social safeguard management system as well as provide opportunity for Bhutan to understand and better manage environmental and social safeguards in its broader development program. It would also provide a basis for reaching agreement among the main donors for harmonization around Bhutan’s country systems.
4. Two prospective Bank-funded projects were selected for piloting the Use of Country Systems (UCS) as part of a World Bank Board-approved pilot program for addressing environmental and social safeguard issues as governed by the OP 4.00: the Second Rural Access Project II (RAP II) and the second Urban Development Project (UDP II).
5. Bhutan was selected for participation in the pilot program due to the relatively recent and therefore advanced state of its laws and regulations corresponding to World Bank environmental and social safeguards, in particular, Environmental Assessment (EA), Natural Habitats (NH), and Physical Cultural Resources (PCR), all of which are triggered by the RAP II Project. In addition, Bhutan’s satisfactory performance in implementing the environmental and social safeguard requirements applicable to the RAP I project, as noted in the Bank’s draft Implementation Completion Report (ICR) on RAP I, suggests that Bhutan’s system may be sufficiently robust to provide the basis for piloting in the rural roads sector.
6. The application of UCS to Bhutan and to the RAP II project is consistent with other donors’ current priorities and programs that seek to contribute to the enhancement of Bhutan’s environmental and social policies, laws, institutional capacity and performance and to the development of the rural roads sector, in particular, the Asian Development Bank (ADB), the Danish International Development Agency (DANIDA), and the Netherlands Development Organization (SNV).
Project Description
7. The development objective of RAP II is to provide all-season road access to targeted rural communities. The project will focus on three Dzongkhags (districts): Wangdue Phodrang, Dagana, and Pemagatshel, where the average distance and walking time from a beneficiary village to an all-season road ranges from 4 to 54 km, or 1 to 15.5 hours. The proposed RAP II is a follow-up operation and it is designed to replicate the positive lessons and good practices from RAP I in three new districts of the country. Its objective of rural access expansion is also assigned a high priority by the RGoB’s Poverty Reduction Strategy, its Ninth Five-Year Plan (2002-2007) and the IBRD’s Country Assistance Strategy for 2006-2009.
8. Of the eight World Bank safeguard policies included in the UCS pilot program, four are applicable to the project: Environmental Assessment (EA), Natural Habitats (NH), Physical Cultural Property (PCP) and Involuntary Resettlement (IR). The remaining environmental and social safeguards – Forests, Pest Management, Safety of Dams and Indigenous Peoples – are not applicable to the RAP II project.
Structure of the Report
9. Part I of this Safeguard Diagnostic Review (SDR) comprises the Equivalence Analysis carried out by World Bank legal and policy staff in collaboration with Bhutan’s National Environment Commission (NEC), its Office of Legal Affairs and officials at other agencies with legal authority over decisions in the rural road construction sector, including the Ministry of Works and Human Settlements (MoWHS) and the Ministry of Agriculture (MoA). Part II comprises the Acceptability Assessment carried out by World Bank policy and technical staff in collaboration with NEC and other Bhutanese agencies charged with the implementation of laws and regulations dealing with the environmental and social impacts of rural road construction. The conclusions of Parts I and II of this report include measures designed to ensure that Bhutan’s systems reach and sustain equivalence and acceptability in connection with the implementation of the RAP II project and also contribute to the enhancement of Bhutan’s capacity to implement its environmental safeguards throughout the roads sector and beyond.
Results of Equivalence Assessment
10. A comparative analysis was conducted on the RGoB’s laws and regulations corresponding to the World Bank’s safeguards on EA, NH, PCR and IR per the Operational Principles of OP 4.00 Table AI. The results of this comparison are presented in matrix format in Annex A of this report.
11. Bhutan’s policies, legislation and regulations pertaining to the EA process and EA documentation are relatively recent and reflect international best practice to a significant extent, with the consequence that there is a substantial degree of equivalence between Bhutanese EA systems and the required elements of OP 4.00 Table A1 with respect to EA, NH and PCR.
12. Remaining differences between Bhutan’s systems and the Operational Principles of OP4.00 Table A1 for EA, NH and PCR include:
§ EA: Absence of required reference in EA documentation to:
o Transboundary and global concerns;
o Bhutan’s international environmental commitments as reflected in treaties and conventions its has ratified; and
o The World Bank’s Pollution Prevention and Abatement (PPAH) Handbook or equivalent international environmental standards;
§ NH: Lack of clear preference for siting projects on previously converted lands; and
§ PCR: Lack of standard provision for dealing with “chance finds.”
Relevance of Equivalence Findings to RAP II Project
13. A number of these differences are not relevant to the RAP II project and therefore, the project may not be the most appropriate vehicle for addressing them. The RAP project does not raise issues involving transboundary, global concerns or Bhutan’s international environmental commitments. The PPAH does not include guidelines for rural road construction. Therefore, there is no imperative for the project to adopt measures designed to bridge these differences with respect to Bhutan’s EA system.
14. Differences with respect to NH and PCH are relevant to the RAP II project and need to be addressed within the scope and term of the project.
15. With respect to IR there is some congruence between Bhutanese systems on land acquisition and the Objectives and Operational Principles of OP 4.00, to the extent that the Land Act (LA), the primary legislation applicable to land acquisition in Bhutan, does require that when the government acquires land it shall inform affected people and enter into consultation with them about the content of the compensation scheme prior to any land taking. Affected people are to be compensated through allocation of replacement land or through financial compensation according to the classification of the land taken. People whose land is acquired and who choose replacement land as compensation are allowed to identify replacement government owned land of equal size and value in the same district. Although the law does not require this in practice, it appears that compensation is often provided to affected people without formal legal rights or claims to lands to be expropriated.
16. However, substantial differences were found between Bhutanese systems and the following Operational Principles of OP 4.00 Table A1 with regard to IR. In particular, Bhutan’s legislation does not include provisions for:
§ Avoidance or minimization of IR to the extent possible;
§ Improvement or restoration of livelihoods of project affected peoples;
§ Assessment of potential social and economic impacts of involuntary land taking or restriction of access to parks and protected areas;
§ Consultation with project affected peoples on issues other than compensation;
§ Provision of information and assistance to displaced persons;
§ Implementation of resettlement plans and entitlements prior to project implementation; and
§ Assessment of results of resettlement action plans.
Environmental and Social Safeguards Chosen for Piloting
17. The above findings indicate that there is substantial equivalence between Bhutan’s systems and the requirements of OP 4.00 Table A1 with respect to EA, NH and PCR. The relevant differences that remain with respect to EA are not relevant to the RAP II project and are best addressed in an alternative context. The differences with respect to NH and PCR are relevant to the RAP II project but can be readily addressed within the scope and duration of the project through the measures proposed below. It is, therefore, proposed that these three environmental safeguards be further considered for piloting under OP 4.00 in the RAP II project, subject to: